Question

Long answer type questions:
Distinguish between the following:
(a) Revenue receipts and Capital receipts
(b) Revenue deficit and Fiscal deficit.

Answer 1

a) Capital receipts refers to those money receipts which either create a liability for the government or cause reduction in assets of the government. Thus, borrowings and other liabilities are included in capital receipts.

Whereas, revenue receipts refers to those money receipts which do not create a liability for the government or cause reduction in assets of the government.

b) Revenue deficit is related to revenue receipts and revenue expenditure of the government. Revenue deficit is the excess of revenue expenditure over revenue receipts. It does not include items of capital expenditure and capital receipts.

A fiscal deficit refers to a situation when total expenditure exceeds the total receipts. Thus, fiscal deficit is estimated as the difference between total expenditure and total receipts of the government.